The Landgericht (LG) München – the Regional Court of Munich – recently delivered a judgment requiring an insurance company to pay out on a business closure insurance policy. The restaurant owner in question will now receive substantial compensation because of the closure of his premises due to COVID-19.
Many business owners and traders have had to close their businesses because of the coronavirus pandemic, with the food service industry, among others, having been hit particularly hard by the lockdown. But there is hope: the Landgericht München delivered a judgment on October 1, 2020 requiring an insurance company to pay substantial compensation to a restaurant owner from Munich who had taken out a business closure insurance policy with the company. The owner’s premises remained closed for 30 days due to COVID-19, with this giving rise to an indemnity claim against the insurer in the amount of around one million euros.
Insurers have to date consistently refused to indemnify policyholders for losses resulting from business closures due to COVID-19, arguing that the coronavirus is not mentioned in their business closure policies and not covered as an insured disease or illness. Insurers have also contended that businesses closures have generally not been based on the German Protection against Infectious Diseases Act (Infektionsschutzgesetz, IfSG) but on decisions of general application adopted by Germany’s federal states (Bundesländer), and thus they are not required to pay out. We at the commercial law firm MTR Rechtsanwälte can report, however, that these arguments have since been dealt a heavy blow by the Landgericht München.
In the case in question, the restaurateur was forced to close his premises based on a decision of general application adopted by the Bavarian state government on March 21, 2020 in response to COVID-19. The restaurant was subsequently reopened in mid-May. It was only at the beginning of March that the restaurant owner, particularly in view of the coronavirus pandemic, took out business closure insurance. The insurer did not wish to pay out on the policy, reasoning, among other things, that the owner needed to have first taken action against the state government’s ordinance.
This line of reasoning was rejected by the LG München. The court held that the matter did not turn on the legality of the order or the legal form of the decision of general application, and that it had therefore not been necessary for the restaurateur to take action against the order. The obligation on the part of the insurer to indemnify was also not conditional on COVID-19 being present in the workplace. Moreover, the court found that the business had in fact been closed based on the Infektionsschutzgesetz, noting that the Bavarian Ministry of Health made explicit reference to the enabling provisions of the IfSG in adopting its decision of general application. It went on to point out that even with the help of takeaway business, the owner would not have been able to keep the business open.
While the ruling is not yet final, it may nonetheless pave the way for many other claims against insurance companies offering business closure policies.